A BMW M8 vehicle at a CarMax dealership in Pleasant Hill, Calif. (David Paul Morris/Bloomberg)
March 11, 2026 4:20 PM, EDT
Starboard Value has amassed a stake of about $350 million in CarMax Inc. and sees an opportunity to accelerate the used car retailer’s turnaround under incoming CEO Keith Barr.
The activist investor has nominated its own CEO, Jeff Smith, to the CarMax board, along with Bill Cobb, the chairman and CEO of Frontdoor Inc., according to a statement March 11 confirming an earlier Bloomberg News report.
Starboard supports Barr, who starts this month, and is optimistic the former InterContinental Hotels Group CEO can be a catalyst for change at CarMax, Smith wrote in a letter to Barr. His engagement with the company so far has also been positive, he said.
“It has been collaborative and friendly, and we are enjoying the conversations we’ve had with them, he said in a Bloomberg TV interview. “There’s a big opportunity.”
CarMax, like other businesses Starboard targets, is a leader in its space but has become a little complacent as time goes on, he said. It has an amazing set of assets, and Starboard bought into it at an attractive valuation, he added.
“You are effectively getting that asset base that’s almost impossible to replicate for free because we are buying into CarMax at tangible book value,” he said. “I don’t know that you would build this business today with all of those assets, but we don’t really have to pay for it as shareholders. They’re there.”
Starboard also sees an opportunity to leverage its experience investing in vehicle marketplaces to help boost performance at CarMax, the largest used car retailer in the U.S. with sales of more than 1 million vehicles a year.
“CarMax has been taking the necessary steps to ensure that this business delivers on its potential and is responsive to shareholders,” Tom Folliard, executive chair of the CarMax board, said in a statement. “Our engagement with Starboard to date has been productive and we remain focused on continued constructive conversations.”
While CarMax was a pioneer in online automobile sales, the company has lagged in recent years amid stiff competition from rivals including Carvana Co. Starboard believes the CarMax business model, combining more than 250 physical car lots with online sales, is better because most buyers still prefer in-person sales.
Patrick Brennan of Cox Fleet talks about the common missteps that fleets make in planning for future maintenance and operational needs. Tune in above or by going to RoadSigns.ttnews.com.
“CarMax’s model is straightforward: The company buys cars, reconditions them, sells them and supports those activities by providing financing, warranties and related services,” Smith wrote. “When buying, fixing and selling are executed well, the model creates a powerful flywheel in which higher volumes drive lower unit costs, enabling more competitive pricing and further share gains.”
Starboard believes that CarMax, with its omnichannel business model, could boost its performance by improving its customer experience. That would include refurbishing vehicles more efficiently, and reducing administrative and overhead expenses by more than $300 million. Starboard also wants CarMax to embrace more dynamic pricing.
Starboard has experience in the space, having invested in online auto seller Cars.com Inc. and Ritchie Bros. Auctioneers — now RB Global Inc. — that points to opportunities for CarMax. Starboard invested in Cars.com Inc. in 2017 and won two board seats the following year. It took a stake in Ritchie Bros. to help it buy IAA, the salvaged-vehicle marketplace.
Incoming CarMax CEO Keith Barr. (CarMax)
Barr’s experience leading a digital transformation of InterContinental Hotels is also seen by Starboard as useful at CarMax.
“While the company has invested meaningfully in digital capabilities, the end-to-end user experience does not yet reflect best-in-class standards,” Smith wrote in his letter. “Simplifying the selling journey, reducing drop-off points, improving clarity around pricing and financing (possibly with fewer choices), and integrating service and warranty offerings more seamlessly can materially improve conversion and inventory velocity.”
CarMax, whose shares were down about 41% in the past year, rose 1.7% to $42.84 at 1:32 p.m. in New York trading March 11, giving the company a market value of $6.1 billion. That compares with a decline of 35% for Cars.com and gains of 80% for Carvana and 14% for AutoNation Inc.
Used car sales were projected to grow at the fastest pace in three years on the back of President Donald Trump’s tariffs announced in April. Since then, though, CarMax’s shares have lost value as the White House postponed or scaled back proposed tariffs, lessening what had been expected to be a plunge in sales of new cars.
Late last year, CarMax terminated CEO William Nash over lagging sales and disappointing stock price. Since then, board member David McCreight has been serving as interim president and CEO.
Written by Ryan Gould, Crystal Tse, David Carnevali and Liana Baker
